Mountain 1st shareholders in a waiting game

Published: Saturday, September 14, 2013 at 4:30 a.m.

Last Modified: Saturday, September 14, 2013 at 12:22 a.m.

Some shareholders of Mountain 1st Bank said they are the ones who lost out in the recent merger with First Citizens Bank.

The merger will take place no later than the first quarter of 2014. The agreement provides for the merger of Hendersonville-based 1st Financial Services Corp. and Mountain 1st Bank into First Citizens Bank, which is headquartered in Raleigh.

In accordance with the agreement, $10 million will be split between the U.S. Treasury — which will receive $8 million so that 1st Financial Services Corp. can pay off the federal TARP program — and common shareholders, who will receive $2 million.

“The merger is a sham,” shareholder Tom Lanwehr told the Times-News. He said Mountain 1st dug a hole it couldn't get out of.

“In my opinion, they agreed to the merger to eliminate themselves from the embarrassment of the federal government shutting their doors,” Lanwehr said.

In 2003, Lanwehr said he bought shares at $11 each. By May 2005, shares jumped to $20 and were at their highest in March of 2006 at $31.50, according to Lanwehr's records. Then the recession hit.

Lanwehr didn't jump ship because he was hopeful the shares would bounce back.

“But it didn't work that way,” he said. “It started trickling down.”

Now, the common stockholder will get about 38 cents per share, he said.

“This is where we ended up,” Lanwehr added.

Mountain 1st was supposed to be a good, local bank, he said.

“I would've rather seen the government shut their doors so the board of directors and officers receive the embarrassment because they ran it into the ground,” Lanwehr said.

1st Financial and Mountain 1st CEO Michael Mayer said he has spoken with several shareholders since the announcement of the merger.

“Once I explained the transaction and the financial position of the company, they understood the benefits of merging with First Citizens,” Mayer said.

He encourages shareholders to the read the proxy statement regarding the merger when it becomes available.

“The proxy will outline all aspects of the merger and provide the history of what the board and management has done to realize the maximum value to the shareholders,” he said.

Mountain 1st began in 2004 in the midst of the growing real estate bubble, and the bank flourished at 120 percent for its first four or five years, said Ken Flynt, associate dean of the Western North Carolina College of Business.

That is not typical, Flynt said.

“That is very excessive for a normal growth track,” said Flynt, who spent four decades in executive positions in the banking industry, including serving as the CEO of four banks.

“In some sense, the timing from the beginning was bad,” he said.

Its total stockholder's equity peaked at $62 million in 2008 and over the span of the last five years, it diminished to $10 million due to bad loans in real estate. They also carved assets from $793 million in 2009 down to $683 million at present, Flynt said.

Mountain 1st did attempt to make strides by entering into a Federal Deposit Insurance Corp. consent order three years ago in hopes of making a comeback.

Flynt said that is common for banks that are in trouble. The consent order mapped out the bank’s path to repair their actions.

Unfortunately, Mountain 1st was unable to meet the stipulations of the consent order. As a result, a merger between 1st Financial Services Corp., Mountain 1st and First Citizens Bank was created in late August.

1st Financial Services Corp. operates 12 branches in Western North Carolina communities through Mountain 1st Bank, with $692 million in assets, $669 million in deposits and $363 million in loans as of June 30.

<p>Some shareholders of Mountain 1st Bank said they are the ones who lost out in the recent merger with First Citizens Bank. </p><p>The merger will take place no later than the first quarter of 2014. The agreement provides for the merger of Hendersonville-based 1st Financial Services Corp. and Mountain 1st Bank into First Citizens Bank, which is headquartered in Raleigh.</p><p>In accordance with the agreement, $10 million will be split between the U.S. Treasury — which will receive $8 million so that 1st Financial Services Corp. can pay off the federal TARP program — and common shareholders, who will receive $2 million.</p><p>“The merger is a sham,” shareholder Tom Lanwehr told the Times-News. He said Mountain 1st dug a hole it couldn't get out of. </p><p>“In my opinion, they agreed to the merger to eliminate themselves from the embarrassment of the federal government shutting their doors,” Lanwehr said.</p><p>In 2003, Lanwehr said he bought shares at $11 each. By May 2005, shares jumped to $20 and were at their highest in March of 2006 at $31.50, according to Lanwehr's records. Then the recession hit.</p><p>Lanwehr didn't jump ship because he was hopeful the shares would bounce back.</p><p>“But it didn't work that way,” he said. “It started trickling down.”</p><p>Now, the common stockholder will get about 38 cents per share, he said.</p><p>“This is where we ended up,” Lanwehr added.</p><p>Mountain 1st was supposed to be a good, local bank, he said.</p><p>“I would've rather seen the government shut their doors so the board of directors and officers receive the embarrassment because they ran it into the ground,” Lanwehr said.</p><p>1st Financial and Mountain 1st CEO Michael Mayer said he has spoken with several shareholders since the announcement of the merger.</p><p>“Once I explained the transaction and the financial position of the company, they understood the benefits of merging with First Citizens,” Mayer said.</p><p>He encourages shareholders to the read the proxy statement regarding the merger when it becomes available.</p><p>“The proxy will outline all aspects of the merger and provide the history of what the board and management has done to realize the maximum value to the shareholders,” he said.</p><p>Mountain 1st began in 2004 in the midst of the growing real estate bubble, and the bank flourished at 120 percent for its first four or five years, said Ken Flynt, associate dean of the Western North Carolina College of Business.</p><p>That is not typical, Flynt said.</p><p>“That is very excessive for a normal growth track,” said Flynt, who spent four decades in executive positions in the banking industry, including serving as the CEO of four banks.</p><p>“In some sense, the timing from the beginning was bad,” he said.</p><p>Its total stockholder's equity peaked at $62 million in 2008 and over the span of the last five years, it diminished to $10 million due to bad loans in real estate. They also carved assets from $793 million in 2009 down to $683 million at present, Flynt said.</p><p>Mountain 1st did attempt to make strides by entering into a Federal Deposit Insurance Corp. consent order three years ago in hopes of making a comeback.</p><p>Flynt said that is common for banks that are in trouble. The consent order mapped out the bank's path to repair their actions.</p><p>Unfortunately, Mountain 1st was unable to meet the stipulations of the consent order. As a result, a merger between 1st Financial Services Corp., Mountain 1st and First Citizens Bank was created in late August.</p><p>1st Financial Services Corp. operates 12 branches in Western North Carolina communities through Mountain 1st Bank, with $692 million in assets, $669 million in deposits and $363 million in loans as of June 30.</p><p>The Mountain 1st branches are in Asheville, Brevard, Columbus, Etowah, Fletcher, Forest City, Hendersonville (two branches), Hickory, Marion, Shelby and Waynesville.</p><p>Pending completion of merger, Mountain 1st will open as First Citizens.</p><p>For more information visit www.mountain1st. com.</p><p>Reach Schulman at 828-6947890 or mark.schulman@blueridgenow.com.</p>